On May 2, Greenpeace published online a number of leaked negotiating documents from the Transatlantic Trade and Investment Partnership (TTIP). The documents are not dated, but most likely do not reflect the results of the 13th round of negotiations, which ended on April 29. They include a consolidated government procurement chapter, which, as expected, builds on the recently revised WTO Government Procurement Agreement (GPA). The text indicates agreement on most of the basic elements of the procurement chapter, but there are a number of areas in which the United States and the European Union have not reached agreement. This post considers several of the more significant unresolved proposals.
The U.S. proposes two additions that would respond to concerns cited in its recent trade barriers report with respect to the EU. First, an anti-corruption proposal would address corruption concerns with procurement in several EU member states, e.g., France and Hungary. The U.S. proposal includes an article, “Ensuring Integrity in Procurement Practices”, that would require the exclusion of suppliers that have engaged in corruption, fraud or other illegal acts from participation in covered procurement. That provision would be linked to a TTIP-wide chapter on anti-corruption, requiring the parties to take measures to combat corruption in matters affecting trade and investment. The U.S. proposal is based on similar provisions in the Trans-Pacific Partnership (TPP) and other free trade agreements (FTAs). It could also respond to a 2014 EU report that concluded that procurement in the member states is particularly prone to corruption.
A second U.S. proposal would address concerns relating to Greece’s requirement that companies seeking to participate in its procurement must provide “documentation from competent authorities”. The required documentation includes certifications that companies have paid taxes and social security obligations and have not been in bankruptcy, and that their managing directors and board members have not engaged in fraud, money laundering or criminal activity. Such qualification requirements are onerous because the U.S. does not have authorities that issue the required certifications. As a remedy, the U.S. proposes that a supplier be allowed to satisfy such requirements through self-certification.
The EU has put forward more revisions of the GPA text than the U.S. Its proposals seem to have at least two aims: to address its concerns with the U.S. procurement system and to bring the GPA-based text more in line with its procurement regulations (directives).
One proposal would address a EU priority in the procurement negotiations — to curb the application to EU firms of Buy America requirements attached to federal funding of state and local projects. With respect to procurement funded by such public grants, the EU calls for a stand-still, that is, a commitment to not introduce any new restrictions or offsets (such as domestic content requirements) on procurement covered by the TTIP. It also seeks an exemption of EU firms from existing domestic preferences and offsets attached to public funding. Under its proposal, the requirements in the TTIP procurement chapter would apply to procurement funded by public grants even if the entity receiving the funds and carrying out the procurement is not covered by the TTIP.
A second EU proposal is aimed at addressing its complaints regarding the absence in the U.S. of a centralized website for the procurement by states, similar to the EU’s Tender Electronic Daily (TED) system, which includes information on procurement at all levels of government. In the U.S., each state maintains its own procurement system and website. The EU calls for a single point of access for the publication of procurement notices of all covered entities. By contrast, the U.S. would apply the GPA text that only requires a single point for central government entities and allows the use of a gateway electronic site for states and other entities.
The EU draws several provisions from its procurement regulations. One such proposal for “Preliminary Market Consultation” would permit a procuring entity to obtain advice from market participants on planning and conducting a procurement. Such participants would be excluded from a procurement only if there were no way of ensuring equal treatment of other suppliers.
The EU suggests incorporation of another regulation to permit procuring entities to require a supplier to prove that it conforms to the requirements or criteria in technical specifications by providing a test report or certificate from a conformity assessment body . Other means of proof could be used under certain conditions. The EU also proposes to modify the GPA-based domestic review procedures with new requirements drawn from its directive on remedies.
The two sides differ in their approaches to the consideration of environmental and labor elements in procurement. The U.S. would permit the use of technical specifications that promote protection of the environment or compliance with labor laws. The first is based on a GPA provision and the second is drawn from the TPP and other FTAs. Under a more extensive EU approach, environmental or social elements could be included in technical specifications, award criteria and contract performance conditions. These EU proposals are tailored after provisions in its procurement regulation.
Despite the number of differences between the two sides on the procurement text, they are likely to be far easier to resolve than the market access issues. After exchanging initial procurement offers at the end of February, the EU and U.S. remain, from all indications, far apart.
Jean Heilman Grier
May 10, 2016
Anti-corruption Provisions for Procurement in TTIP
TTIP: Expansion of Buy America Requirements
TTIP Procurement Negotiations: A Djaghe White Paper